In a major win for the banking industry, Congress has overturned a Consumer Financial Protection (CFPB) rule that would have limited overdraft fees to $5 at the nation’s largest banks and credit unions (those with more than $10 billion in assets that levy more than 80 percent of all overdraft charges each year).

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The rule, one of the CFPB’s last regulatory efforts of the Biden Administration, was projected to save U.S. consumers roughly $5 billion annually.

The resolution killing the overdraft rule passed the House largely along party lines in early April. The Senate approved a similar measure last month. The bill now awaits President Trump’s signature, which is expected, as it aligns with his push to roll back government regulations.

The CFPB estimated that when its overdraft rule would have taken effect in October, it would have saved $255 annually for a typical household that incurs overdraft fees.

The rule gave banks and credit unions three options: charge a flat $5 fee, set a higher fee if they could justify it based on the actual cost of handling overdrafts, or charge as much as they wanted and treat overdrafts as credit products with all the required federal lending law disclosures, including the annual percentage rate (APR).

Industry Pushback and Legislative Reversal

Banking groups and Republican lawmakers have always opposed the CFPB’s efforts to regulate overdraft fees, claiming the agency did not have the legal authority to do so. They also claimed the rule would force banks to stop offering overdraft protection entirely.

This rule would have imposed “unlawful government price caps,” said Rob Nichols, president and CEO of the American Bankers Association, in a statement applauding the congressional vote. By overturning the rule, he said, “American banks can continue offering this important, optional service consumers rely upon to meet their short-time financial needs.”

Consumer advocates criticized the vote as a giveaway to financial institutions, “protecting price gouging” at the expense of working Americans.

“Repealing the CFPB’s limits on overdraft fees gives big banks the green light to rip off their customers with excessive charges that far exceed the cost of covering the transaction,” Chuck Bell, advocacy program director at Consumer Reports, wrote in a blog post.

Lauren Saunders, associate director at the National Consumer Law Center (NCLC), said: “Republicans in Congress had a chance to put $5 billion back in the pockets of working people, including service members, by dramatically cutting big bank overdraft fees. Instead, they sided with Wells Fargo, Chase, and Navy Federal Credit Union, allowing them to use abusive overdraft fees to pad their profits.”

Costly Overdraft Fees Unfairly Punish Consumers

Overdraft fees—charged when financial institutions cover a transaction that exceeds a customer’s account balance—averaged $27.08 per overdraft transaction last year, up from $26.61 in 2023, according to Bankrate's latest checking account survey. Most debit card transactions that result in overdraft fees are $24 or less, according to CFPB data, and are repaid within three days.

Despite policy changes at some banks to lower or eliminate overdraft fees, they continue to generate billions in revenue. Last year, Chase and Wells Fargo each earned more than $1 billion in overdraft fees, according to an NCLC analysis. The largest credit union, Navy Federal, which serves military families, collected $335 million—more than any other bank, except Chase and Wells Fargo—despite its smaller size.

When the overdraft rule was proposed in early 2024, Rohit Chopra, the CFPB director at the time, said overdraft fees were often assessed for reasons people don’t expect or understand, “taking a heavy toll” on families living paycheck to paycheck. “Compared to credit cards and other forms of credit, overdraft lending is very expensive,” he said.

Some Banks Already Made Changes   

Amid increasing public scrutiny of so-called “junk fees,” some major banks have voluntarily changed their overdraft policies in the last few years. As a result, overdraft/NSF revenue in 2023 dropped more than 50 percent from pre-pandemic levels, saving consumers more than $6 billion annually, according to CFPB data.

Bank of America dropped its overdraft fee to $10, down from $35, in 2022.

Capital One has eliminated all overdraft fees. For customers who enroll in the bank’s No-Fee Overdraft service, the bank will authorize and pay overdrafts “at its discretion” for certain transactions, such as automatic bill payments and recurring debit card transactions, with no fee.

Chase Bank doesn’t charge customers its $34 overdraft fee if they’re overdrawn by $50 or less at the end of the business day OR if they’ve overdrawn by more than $50 and bring the account balance to overdrawn by $50 or less at the end of the next business day.

Wells Fargo gives account holders a 24-hour grace period before being charged overdraft fees.

Many banks have also eliminated the fee to transfer money for overdraft protection services that automatically transfer money from a customer’s savings account to their checking account to cover an overdraft that would trigger a fee.

Many online banks never charged overdraft fees or eliminated them well before the biggest banks changed their policies.

Ally Financial, which never charged overdraft fees on debit card transactions, put an end to all overdraft fees in 2021.

Chime offers an overdraft service called “SpotMe” that allows qualifying members to make a debit card transaction that exceeds their balance by up to $200 with no fee.

Discover Bank ended all fees on checking and savings accounts in 2019.

Be Proactive

Here are five things you can do to avoid overdraft fees:

1. Decline optional overdraft protection. If you decline this service, debit card purchases and ATM transactions that put your account in the red are declined without a fee. Note: Declining overdraft protection does not eliminate a Nonsufficient Funds Fee (NSF) if you write checks that bounce.

2. Set account alerts. Get notified via text or email when your balance drops below a certain level, giving you time to add funds before overdrawing. You can do this online or via the financial institution’s mobile app.

3. Link your accounts. Have your checking account linked to a savings account or line of credit that can automatically cover any overdraft situation. There may be a charge for this service, typically around $10, which is cheaper than the average overdraft fee.

4. Compare your options. When shopping for a new checking account, look for a bank or credit union with low or no overdraft fees.

5. Be vigilant if you use auto pay. Auto pay is convenient and a great way to avoid late payments, but if you do this, you need to make sure there’s enough money to cover auto pay bills.

If you slip up and overdraw your account for the first time, contact the customer service department and see if they’ll waive the fee. Then, quickly deposit money into your account, as some institutions charge multiple overdraft fees if an account is overdrawn for several transactions on the same day.

More Info:

• Overdraft Fees: Compare What Banks Charge in 2025
• What Is an Overdraft Fee, and How Can You Avoid It?
• Best Free Checking Accounts